A lingering question often shadows dreams of higher education abroad, "How to get an education loan for international students?" In this comprehensive guide, we will navigate the realm of education loans, helping you understand the ins and outs of securing a substantial investment for your educational pursuits. Let’s get started.
Education Loan Types
1. Secured or Collateral Loans: -
Secured education loans necessitate collateral, assuring the lender. This collateral, often property like a house or land, grants borrowers added benefits, such as potential interest rate breaks from certain banks.
2. Unsecured or Without Collateral Loans: -
Unsecured education loans, in contrast, don't require collateral, offering flexibility for specific courses and institutions. Non-Banking Financial Companies (NBFCs) are known for providing unsecured loans, catering to students without tangible assets for collateral. Loan amounts may extend up to 65 lakhs in select cases, contingent on the chosen country and academic program.
3. Lender Types - Indian Lenders: -
Indian lenders, comprising public and private sector banks, along with NBFCs, adhere to government regulations. Institutions like HDFC Bank, ICICI Bank, AXIS Bank, and public banks like State Bank of India and Bank of Baroda are instrumental in supporting students seeking financial assistance for overseas education.
4. International Lenders: -
Dedicated to higher education, international lenders facilitate loans for students studying abroad. Thorough documentation is typically required, with funds disbursed after completing the necessary paperwork. These lenders play a crucial role in supporting students pursuing job-oriented programs like MS, MCA, MBA, or courses endorsed by international bodies such as CIMA – London and CPA – USA.
Eligibility Criteria For International Student Loans
1. Academic Profile
Your academic achievements are pivotal for a non-collateral education loan. Maintain a robust academic record with a minimum of 60% in 10th, 12th, and your degree. More than three backlogs may pose challenges, so emphasize your academic dedication for higher approval chances.
2. Financial Co-Applicants
In the absence of collateral, the financial co-applicant plays a crucial role. Lenders assess the co-applicants income and CIBIL score, seeking assurance for repayment. Whether salaried or self-employed, the co-applicant acts as a safety net, instilling confidence in the student's repayment capabilities.
3. Course/Degree
Lenders favour specific courses, especially in STEM disciplines. UG and PG programs in STEM fields are preferred, while other courses may face scrutiny. Understanding the lender's preferences for your chosen course enhances your application's favorability.
4. Country and University
The choice of country and university significantly impacts approval. Focus on major study-abroad destinations like the USA, UK, Canada, Australia, Ireland, and Germany for higher approval chances. Private banks may have specific approved universities, emphasizing alignment with their criteria for optimal results.
Essential Documents Required For Personal Loan For International Students
Securing a Rs 25 Lakhs education loan without collateral requires meticulous documentation. Here's a concise guide to the crucial documents ensuring a hassle-free application process:
1. KYC Documents: Valid passport, Aadhar card, and government-issued identification.
2. Passport-size Photographs: Recent photographs meeting lender specifications.
3. Bank Statement (Last 6 Months): Highlights financial transactions, income, and expenditure.
4. Optional – Guarantor Form: Strengthens the application with a guarantor's financial backing.
5. Offer Letter Copy with Fee Schedule: Outlines admission details and associated fee schedule.
6. Academic Documents: Mark sheets, passing certificates of S.S.C., H.S.C., and degree courses.
7. Income Proof of Guarantor/Co-Applicant: Salary slips or Form 16 demonstrating financial stability.
Pros Of Student Loans For International Students
1. Education Loan Tax Benefit: Education loans often bring tax benefits, offering relief to borrowers and maximizing financial advantages during repayment.
2. Improves Credit Score: Timely repayment positively impacts credit scores, opening doors to future financial opportunities beyond the academic journey.
3. Low-Interest Rate: International banks frequently provide education loans with lower interest rates, resulting in substantial savings over the loan's duration.
4. Concession or Discounts on Interest: Some lenders offer interest rate concessions, enhancing the affordability of education loans. Exploring these options can be financially advantageous.
5. Easy Online Application: Streamlined online applications make it convenient for students to initiate and complete the loan process from home.
6. Easy Repayment in EMIs: Equated Monthly Installments (EMIs) ensure a systematic and manageable repayment process, allowing effective financial planning during and after studies.
7. Minimum Documentation: Education loans often require minimal documentation, simplifying the application process for international students.
8. Quick and Easy Processing: Efficient processing ensures timely financial support, enabling students to start their studies without unnecessary delays.
9. Benefit of Moratorium Period: Education loans typically offer a moratorium period, providing flexibility and easing immediate financial burdens post-graduation.
10. Helps in Visa Approval: Acting as evidence of funds during visa applications, student loans enhance the chances of successful visa approval, showcasing financial support for the academic tenure.
Cons Of Student Loans For International Students
1. Demand for Many Documentations: The application process often involves complex documentation, posing a challenge for some students. Collateral requirements can add complexity.
2. Limited Program Availability: Some lenders may restrict unsecured loans to specific courses, potentially limiting choices in universities and academic programs.
3. Education Loans with No Security: Unsecured study loans from international lenders may have stringent criteria, limiting access for some students.
4. Guarantor Requirement: International lenders may demand a guarantor in the country of study, posing challenges for securing one with specific citizenship requirements.
Alternatives to Student Loans
While student loans provide a viable financial solution, exploring alternative avenues offers additional flexibility for financing global education. Here, we outline alternative pathways that can help students navigate potential challenges associated with traditional education loans:
1. Loan Against Property: This allows students to access funds without specifying the purpose, of utilizing property as collateral. It's a versatile option for various educational needs.
2. Gold Loan: Pledging gold assets for a loan at lower interest rates is a traditional and effective approach, providing a quick and reliable financial solution.
3. Scholarships: Based on academic merit, achievements, or specific criteria, scholarships offer invaluable financial support, mitigating the need for extensive borrowing.
4. Family Savings and Assets: Relying on family resources presents a self-financing option, avoiding complexities associated with loan applications and repayment structures.
5. Government Grants: Central and state governments provide financial assistance, reducing reliance on loans for global education financing.
6. Community Schemes: Ethnic communities and organizations offer tailored financial support for members pursuing higher education, tapping into cultural or ethnic backgrounds.
7. Earn & Learn Programs: Educational institutes abroad offer part-time work opportunities for students, allowing them to cover course expenses through hands-on financing.
Closing Thoughts: -
Embarking on a global education journey is a transformative experience, and financing should not be a barrier. While education loans stand as a reliable option, students are encouraged to consider the full spectrum of choices available. Whether through traditional loans, alternative funding sources, or a combination of both, the key lies in making informed decisions aligned with individual circumstances and aspirations.
At Tata Capital, we understand the significance of your academic dreams and the role finance plays in making them a reality. As you navigate the global education landscape, may you find the perfect blend of financial support and academic pursuit. Should you choose to explore an education loan, alternative avenues, or a tailored combination, we are here to support your journey. Your global horizons await – go forth and conquer!
28 February 2024
6 mins read
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